Moody's: Snow Brand to maintain profitability

Although their sales growth will slow, the Japanese dairy companies, including the Ba2-rated Snow Brand Milk Products Co., Ltd., will maintain stable profitability through the intermediate term. This is partly as a result of Japan's supply system for raw milk, which is based on demand estimates and decreasing, but predictable demand for milk and milk-based beverages and increasing demand for functional dairy products and cheese, Moody's Investors Service said in a report.

In response to increasingly intense competition and the possibility of an increased international presence in their home market, Meiji Dairies Corp., Morinaga Milk Industry Co., Ltd. and Snow Brand Milk Products Co., Ltd. have been investing in production facilities for some time, aiming to strengthen product competitiveness, Moody's said. However, the agency said it expects the companies to maintain financial stability, despite temporary downward movement in financial ratios from this investment, based on their sound financial policies.

In addition, the companies' recently increased investment in production facilities supports their business strategies and is intended to expand their volumes of more profitable products, which Moody's believes will allow them to maintain profitability and stable cash flow.

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